Gold prices soars amid political turmoil in US

Gold, US central bank and US congress trending points

Gold had hit a fresh monthly high (1269.58) amid political agitation on US parliament regarding US government shutdown on the Mexico-wall issue

The precious metal might continue to gain, as there has been no sign of shine over the partial US border shutdown

The bull-run may extend up to early January, as there had been talks of ousting the Federal Reserve Chairman Jerome Powell, which could shake the US economy and smoothen a gold rally

Gold prices remained solid, amid global stock outcry and US government shutdown

As the American dollar failed to utilize the Federal reserve rate hike amid political chaos, the bearish reaction to gold price was short-lived and a deadly gridlock in the US congress paved the way for a gold rally.

While this report is being prepared, the 25thof December, GMT. 15.00, the market is closed due to the Christmas holidays, and yesterday’s shortened market had extended the recent leg of gold rally, resting it at $1269.58.

The gold price may continue to move higher over the coming days, at least up to early January, as US Treasury head, Mnuchin comment only worsened the scenario for American dollar and US stocks, while smoothing the progress of an upbeat gold price.

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While the political tension and deadlock in the US congress ought to last at least until Thursday and uncertainties are looming large, as Trump threatened that, the US might experience a long-term shutdown, if his demand regarding the wall on Mexican border was not approved.

Yesterday, the December 24th, US president Donald Trump had been quoted tweeting that, “if the Dems vote no, there will be a shutdown that will last for a very long time”. As a response, the Federal Reserve

might continue to soften its hawkish tone in 2019 and the central bank rate hike may stay on hold, as the officials are citing a growth moderation ahead.

Even if the Federal Reserve is set to continue its projection regarding the rate hike up to 2.75%-3.00%, next year, the tone ought to get softened, as the central bank’s inflation target would be fulfilled by then.

At this standpoint, it appeared that the market is prepared again for a gold rally and the political chaos on Washington is not going to be faded away anytime soon, as democrats have taken control of the house of representatives and Donald Trump would not be fulfilling his wishes as easily as he had been doing before the US mid-term election.

Gold daily price chart

Regarding the Mexican border, the US president Trump demanded $500 million, while the democrats were not found prepared to give away anything over $130 million. However, later the democrats were agreed to pass a bill for $160 million, yet Trump remained solid on his demand and he threatened repeatedly, that a long-term shutdown might have been on the card, if his demands were not approved in the US congress.

Regarding the Federal Reserve, the US president and US lawmakers, had repeatedly criticized US central bank’s monetary policy and recently, US president Donald Trump had been quoted saying that, the FED is the only problem in US economy. Apart from that, there had been informal discussion regarding the ousting of Federal Reserve Chairman, Jerome Powell, and by presidential rights, the US president could fire the chairman, yet the rule has not been tested previously. If Fed chair is ousted, the independence of US central bank would be questionable and that would make American dollar more vulnerable and a long-term gold rally would be on the card.

Bottom Line

At this standpoint, amid vicious cycle of political chaos and deadlocks, a gold rally is highly likely, which might last up to early January and its potential support level has been lifted and the key resistance zone remains at $1281.45. If it is broken, the gold might retest the 1300s region in a near future, and a gold rally might already have presented itself, amid gridlock in US congress and a partial US government shutdown, questionable rate hikes of US central bank alongside, crisis sickened global economic growth.

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